EUR/GBP rallies to 3-week tops, around mid-0.9000s

• EUR/GBP gained strong traction on Tuesday amid some aggressive selling around the GBP.
• Increasing risk of a no-deal Brexit, BoE rate cut speculations weighed heavily on the sterling.
• Technical buying above the 0.9000 mark further contributed to the strong positive momentum.

The intense selling pressure surrounding the British pound pushed the EUR/GBP cross to near three-week tops, around mid-0.9000s during the mid-European session.

As talks between the UK and the EU enter into the penultimate round on Tuesday, the sterling prolonged its recent selloff on the back of increased risk of a no-deal Brexit. The market concerns resurfaced after the UK Prime Minister Boris Johnson threatened to walk away from Brexit talks if a deal is not reached by mid-October.

The negative Brexit-related headlines spooked investors and fueled worries that a hard split would cripple the UK economic growth. This, in turn, prompted investors to step up bets that the BoE will cut rates and push then into the negative territory. Rate cut speculations further took its toll on the British pound.

On the other hand, the shared currency remained depressed in the wake of a strong pickup in the USD demand and the ECB's concerns over the exchange rate level. The EUR/GBP cross, however, seemed rather unaffected and build on its recent bounce from three-month lows, taking along some trading stops near the key 0.9000 psychological mark.

It will now be interesting to see if the cross is able to capitalize on the strong bullish momentum or traders opt to take some profits off the table as investors await fresh Brexit update and ahead of the upcoming ECB monetary policy decision on Thursday.

Technical levels to watch